Lean Startup Strategy: Will Corporations Innovate Like Startups?
Lean startup strategy has come into full force. Initially, this approach was designed to help startups that are short of funding gain a foothold in a certain niche. But why do business titans who feel no need for investments, resources or even the market influence, try hard to adopt lean methodology? Is “lean” really applicable at the level of an enterprise?
Lean Methodology Revolution
Early on, the concept of lean business was synonymic to the notion of a startup. The lean methodology came to the rescue when too many startups were failing miserably. Sure they did! These startups had never spoken to their customers, tried too hard to meet a non-existent market need and overestimated vitality of their ideas. Lean startup strategy appeared to be a tried-and-true remedy. But it’s not all roses.
Lean Business: Why It is Difficult for Corporations to Work in It
There are two sides to the lean approach. We’ll start with the dark one to see which threats the companies should be aware of when practising lean startup strategy.
At a very high level, a company that has decided to do it the lean way should be guided by the following principles:
- Develop a minimum viable product (MVP), proof of concept (PoC) or prototype to test the hypothesis whether a market needs a product or not.
- Try the hypothesis, measure data received and validate this hypothesis.
- Decide whether to build a full-fledged product or pivot.
Let’s assume that a particular enterprise would adopt the principles of startup methodology. They might encounter certain setbacks while trying to look more innovative and competitive in a digital world.
The Biggest “Lean” Fear of the Enterprise
According to the survey “How large companies are using lean startup methodology,” 50% of respondents feel concerned or aren’t ready to show unpolished products to their audience. Moreover, 36% believe that it’s complicated to develop an MVP within their industry. It means that an MVP, a must-have from the startup survival kit, is seen as a stumbling block by the majority of incumbents. Possible threat to the brand’s image, the hard decisions as what to call “minimal” in fields like shipbuilding or pharmaceutics and, finally, a need to move fast with MVP development – all of these issues are often too much to deal with at a corporate level.
An Unequal Cost of Failure
The lean methodology teaches startups how to deal with failures. When experimenting with the market response, entrepreneurs should be ready that their MVP might not be a success. The ability to recover fast and move on from failure to failure is perceived as a learning basis for the lean business. (This good advice applies not only to startups, by the way). But the categories of failure will differ. When a startup losses seed capital, a company may lose an entire business branch; when a startup risks a target audience of one thousand users, a company risks an account with one million of end users. The bigger the company, the higher the stakes.
Vast Opportunities Often Entail Vast Bureaucracy
Startups are not mini versions of the established companies. Still, they often compete like siblings in a family. Advantages of early-stage companies over the corporate giants seem less obvious, but they do exist. A time-consuming process of executive approvals contradicts the very idea of lean startup strategy. In lean business, the category of time is precious. Decisions and works are performed quickly to eliminate waste of time and get vivid evidence to move further or pivot. Slow decision-making, going through risk management processes and communication with many stakeholders impede adoption of the lean methodology. Innovations won’t wait, which equates to one more score for a startup.
Lean Business: Why Corporations Should Learn How to Work in It
On the bright side of a lean business, innovations are taken faster and further. Corporate giants have knowledge and resources to combine agility and nimbleness of the lean business with the resources and influence of a reputable enterprise. The ability to size up the underlying principles of the lean methodology morph into the tangible results.
There’s No Need to Reinvent the Wheel
A hype surrounding lean business just won’t subside. Since 2011, when Eric Ries released The Lean Startup book, all sorts of startups have made use of lean methodology. Some of them were the real deal, others appeared to be a flash in the pan. But what’s important is that startups are eager to reveal their success. They feel no limits in telling success stories or writing articles with lessons learned. All you need to do is listen and apply it the right way. Large companies have paired expertise with plentiful insights about lean business help to make rational decisions and wise moves.
Incomparable Pool of Resources
Corporate behemoths have been there for ages. Customer acquisition is not a problem for them. Neither is deciding on a target audience to test the hypothesis with an MVP. Moreover, big corporations usually have a well-coordinated R&D team. In the end, it’s the research and development departments that will implement the lean methodology. This way, companies can improve their innovation success rate by applying lean principles in separate departments. There is no need to transform the entire business at a time.
Lean Business is a Modern Business
Even though big corporations look stunning from the outside, they constantly undergo disruption and fight for mindshares. On top of that, they are a bit jealous or even intimidated by startups. Just think! It took them decades groping their ways to the top to make names. But what do we have today? Airbnb, Uber, Xiaomi, Snapchat are several names of the hilariously famous startups that didn’t exist ten years ago but now are worth billions. There is no life tenure in the business world, but there is uncertainty, as Eric Ries states. It means that even the global powerhouses need renewal and revision of their business methodologies. Lean startup strategy is the right chance to do so.
P&G, Toyota, GE and Philips are just several global titans that have already tried and succeeded with a lean startup approach. So it’s not about whether the established companies should adopt the lean methodology. It’s more about in what way it should be incorporated to bring benefits. Uncertainty in the business world only proves that there is no universal recipe for innovation success.
Lean methodology suggests that a startup’s true purpose is to turn bright ideas into products. To make this so, entrepreneurs should try their products out, learn how customers respond and decide on whether to build a full-fledged product, pivot or abandon everything. There is a huge amount to be gained from a lean startup strategy, so it’s better to start testing this hypothesis right now.